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The Profession

First two IFRS sustainability disclosure standards launched

The new standards provide a global baseline that can be combined with jurisdiction-specific disclosure requirements

Agronomist using digital tablet for analysis of plantation While the standards have been developed for capital markets, any organization can adopt them (Getty Images / Luis Alvarez)

The International Sustainability Standards Board has released the first two of its disclosure standards, creating a framework for the global business community to disclose material information on sustainability and exposure to climate-related risks and opportunities.

On June 26, the ISSB and partners, including CPA Canada, celebrated the launch of the following IFRS® Sustainability Disclosure Standards: General Requirements for Disclosure of Sustainability-related Information (IFRS S1) and Climate-related Disclosures (IFRS S2).

CPA Canada President and CEO Pamela Steer says she is impressed by the ISSB’s efforts to release its inaugural standards less than two years after the board’s formation.

“From the start, the Canadian accounting profession has been actively involved in shaping these standards, including facilitating Canada’s successful bid to establish the ISSB Centre in Montreal,” she says. “The standards will deliver much-needed consistent and comparable sustainability information for the capital markets.”

Here’s a look at five things Canadian CPAs need to know to about the new standards:

1. New standards prioritize investor information needs and focus on climate disclosures

The ISSB’s standards are intended to meet the information needs of investors and the resulting disclosures are to be provided as part of an entity’s general purpose financial reporting. IFRS S1 sets out general reporting requirements for disclosing sustainability-related financial information. IFRS S2 requires an entity to disclose information about climate-related risks and opportunities and the impact on an entity’s financial position, performance, cash flows, strategy and business model.

These two standards are designed to be applied together and include reporting across four pillars—governance, strategy, risk management, and metrics and targets—based on the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).

The ISSB has decided to prioritize climate-related information, meaning that companies do not need to provide disclosures about sustainability-related risks and opportunities beyond climate in the first year of reporting.

“While the standards have been developed for capital markets, they do not preclude any organization from adopting them,” explains Rosemary McGuire, CPA, vice-president, research, guidance and support, with CPA Canada. “Currently any organization can effectively apply these standards.”

2. Standards will come into effect Jan 2024 but are not mandatory (yet)

The ISSB standards, which are effective for annual reporting periods beginning on or after January 1, 2024, provide a global baseline of sustainability disclosure standards that can be mandated and/or combined with jurisdiction-specific requirements.

“Even though they are going to be available at that time, the standards are not currently mandated in Canada,” explains McGuire. “The natural question is, what is the process to get them into legislation?”

The Canadian Securities Administrators (CSA) determine the reporting requirements for Canadian public companies and are responsible for decisions regarding mandatory adoption of sustainability disclosure standards, she adds. “The CSA was first out of the gate when it issued its own climate disclosure proposals in 2021. It has since indicated that it will consider ISSB and U.S. developments before proceeding with their final rule.”

The process will also involve the new Canadian Sustainability Standards Board (CSSB), which will review final ISSB standards for their suitability for adoption in Canada, she adds. “There are lots of moving pieces here, but undoubtedly the ISSB standards will influence future sustainability reporting requirements here in Canada.”

3. Companies will still need to comply with different sustainability disclosure requirements

While adoption of the ISSB standards is currently voluntary, organizations are already subject to different laws, regulations and requirements that require various types of disclosures on environmental, social and governance (ESG) matters.

For example, the Office of the Superintendent of Financial Institutions (OSFI) has already mandated climate disclosures for federally regulated financial institutions and large emitting companies in Canada are subject to regulatory reporting requirements, notes McGuire. “Other larger companies are already doing voluntary reporting on these areas. For them it’s now a matter of aligning with the new standards.”

There are also the cross-jurisdictional implications of the European Union (EU)’s Corporate Sustainability Reporting Directive and the U.S. Securities and Exchange Commission (SEC)’s proposed climate disclosure rule. For example, it is estimated that approximately 1,300 Canadian companies will be subject to the EU’s sustainability reporting rules.

The good news is that the ISSB is actively working with other jurisdictions to maximize interoperability of their standards, says McGuire. “The path toward convergence around a comprehensive baseline of sustainability standards is not yet entirely clear, but we remain optimistic. In the meantime, companies need to brace for the inevitable reality of having to comply with different requirements, at least in the short term.”

4. Smaller companies are not exempt

Concerns have been raised about the burden that the ISSB standards may impose on smaller companies with limited resources. This is particularly important in Canada where a large proportion of Canadian issuers are quite small.

The ISSB has taken steps to support smaller organizations in this area, says McGuire. “We are pleased to see that the ISSB has introduced provisions that address scalability and provide assistance to preparers on initial application of the standards, including some temporary relief around timing of reporting, comparative information and Scope 3 greenhouse gas (GHG) emissions disclosures.”

Expectations are there will be a trickle-down effect in which smaller companies in the value chain will be asked to provide a lot of the information required for the new standards. “It’s not just the public companies that are caught by the rules,” adds McGuire. “We anticipate increased pressure on private companies to provide more climate-related information.”

McGuire advises businesses to take the time to understand the requirements and put systems and processes in place to track data before those requests come in. “Although they may not be directly subject to the rules, the proposed Scope 3 GHG disclosure requirements will impact private companies that are customers or suppliers of public companies.”

5. Organizations need to start laying the groundwork for sustainability reporting now

Even the most comprehensive standards will not deliver the intended benefits to users, if they are not implemented properly or consistently, says McGuire. “The volume and complexity of what is coming should not be underestimated. Don’t wait for sustainability reporting rules to be finalized before getting started.”

CPAs are well positioned to assemble cross-functional teams, address relevant controls and processes needed to gather and report the data, evaluate reasonableness of assumptions used in the application of the standards, as well as address the related accounting implications and implementation challenges, she adds. “They can help build the bridge between sustainability and financial performance, ensuring that a company’s sustainability reporting is relevant and consistent with its other disclosures.”

In addition, CPAs play a critical role in providing independent, third-party assurance (an area where demand is expected to grow), which enhances the credibility and reliability of climate and other sustainability disclosure. The International Auditing and Assurance Standards Board is currently working to develop an overarching standard for assurance on sustainability reporting.

Organizations need to carefully monitor these developments and begin preparing for what is to come. This includes evaluating the potential impacts of the standards, assessing readiness to implement the standards, and starting to prepare a detailed implementation plan.

CPA Canada is committed to ensuring that CPAs and the broader business community have the knowledge and skills they need to better manage, account for and report on sustainability issues, says McGuire. “To prepare both new and existing members of the profession to face challenges ahead, sustainability is now a key priority within the profession’s new Competency Map and is being integrated into the CPA certification program and resources for ongoing professional development.”


The work will not stop with these initial two standards, McGuire stresses. “The ISSB is currently consulting on its future workplan and is considering potential research projects on biodiversity, human capital, human rights, and a potential joint project with the International Accounting Standards Board (IASB) on connectivity in reporting.

“We are proud to collaborate with the ISSB and be formally recognized as an ISSB capacity building partner committed to supporting high quality standards implementation and boosting adoption of the standards in Canada and globally. It is important that we weigh in and inform the future direction of the ISSB.”


Check out CPA Canada’s extensive sustainability resources, and make sure to keep up with the latest news on Canadian and international sustainability reporting and assurance developments.